From the February 2008 issue of Wealth Manager Web • Subscribe!

The Next Step

If you're like most wealth managers, you probably haven't thought much about Web 2.0. When it has come to your attention, you may have dismissed it as just the latest frivolous fad for kids. After all, some of the best known Web 2.0 sites, such as MySpace and Facebook, all seem to be about gossiping and flirting. But the same technologies that assist teens and 20-somethings in making connections are also helping professionals to meet and network. For financial advisors, whose personal touch with clients is fundamental to the business, Web 2.0 sites can provide very powerful tools for fostering and nurturing relationships.

The term Web 2.0 came into use in October, 2004 after the first O'Reilly Media Web 2.0 conference in San Francisco. Its definition is a bit nebulous because the term is used to describe both modern Web sites and the technologies underlying them. In any case, the name implies improvement over the generation of sites that first made the Internet a pop culture phenomenon a decade ago. Rather than the read-only sites of the 1990s, these second-generation sites, communities and services are designed to "facilitate creativity, collaboration, and sharing between users," according to Wikipedia--a site that is itself a good example of Web 2.0. Wikipedia, which calls itself a free encyclopedia, is written by volunteers all over the world who collaborate by fact-checking and editing each other in a democratic--if somewhat haphazard--fashion.

Some technologies that fall under the Web 2.0 umbrella are:

?Social networks: communities of people with shared interests;

?User-generated content: visitors to Web sites create the content by writing articles, publishing photographs and sharing video clips, etc.;

?Blogs (term coined from Web logs):brief, casual, articles or essays that are frequently published and displayed in reverse chronological order;

?Online video: video clips stored on Web sites and live video conferencing over the Internet;

?Really Simple Syndication, or RSS: a method of publishing content from a Web site so that it is delivered to you when it is published rather than requiring you to access the Web site;

?Podcasts (from iPod crossed with broadcast): like radio on the Web, podcasts are audio files that can be played on PCs and portable media players.

Another way to think about Web 2.0 is to consider the components its sites have in common. Tim O'Reilly, president and CEO of publisher and conference producer O'Reilly Media, has identified seven key features that Web 2.0 sites offer:

1.Services, not packaged software, with cost-effective scalability

2.Control over unique, hard-to-recreate data sources that get richer as more people use them

3. Trusting users as co-developers

4.Harnessing collective intelligence

5.Leveraging the long tail through

customer self-service

6. Software above the level of a

single device

7.Lightweight user interfaces, development models and business models

Conversation vs. Content

"If the first wave of Web sites was about content, then the second generation is about conversation," says Kip Gregory, founder of The Gregory Group, a Washington, D.C. firm that helps financial service providers take advantage of technology. "For the average advisor, there's some confusion about Web 2.0. Unless you're in your 20s, you look at Facebook or Google Maps and wonder, 'What does it mean?'" Now, Gregory reports, many advisors are starting to think about Web 2.0 and want to figure out how it will be useful to their business.

One Web 2.0 site Gregory uses frequently and recommends to his clients is LinkedIn, an invitation-only business-oriented site for professional networking. According to the company, it boasts more than 17 million registered users, spanning 150 industries and more than 400 economic regions. The purpose of the site is to allow registered users to maintain a list of contact details of business people they know and trust. Professionals are using the site to find jobs, people and business opportunities recommended by the contacts in their LinkedIn communities.

"LinkedIn is evolving from the notion of a shared Rolodex to a community-based platform where you can broaden your network of contacts and tap into collective wisdom and knowledge," Gregory explains. He reports using the site "to reconnect with my own former clients, to expand my newsletter list and to help my clients who are advisors find prospective clients."

Reputation Management

"With respect to wealth management, it's certainly hard to point to any specific impact of Web 2.0," says Peter Richards, a principal at The Richards Group in Brattleboro, Vt. "The amount of information available to investors on the Web is tremendous, and in theory it makes the financial markets extremely efficient."

Richards has spent time looking at various participatory sites, trying to judge the value of the content from an investing standpoint. "With large, extremely well-developed companies such as IBM, GE and Exxon, there is usually a ton of information at all times through traditional channels. With smaller, more regional plays, it can be interesting to see what type of information is out there beyond what dribbles out of a company's corporate communications department."

But, Richards cautions, it's important to take comments made on bulletin boards and blogs with a grain of salt. "I've never been overly impressed by what I've found people 'talking' about on various Web sites, as it appears to be people with either lots of time on their hands or a bone to pick with a certain company and/or the performance of its stock."

Another Web 2.0 area where Richards sees potential value is choosing a wealth manager to work with. "It is very easy to have a conversation with the rest of the cyber world about who is good to work with in your area, who has been underwhelming, and so on." From time to time, Richards does research "to see what people might be saying about The Richards Group or our competition....It can be good information to have on hand, he says."

Money Management

What better place to find out what Web 2.0 has to offer investors and their counselors than the Web itself? Check out the following sites which are among the best 2.0 apps for money, finance and investment:

?, a free personal finance manager that helps you monitor your net worth, debts and assets. You can share your net worth with other members and view theirs--without giving away your personal identification information.

?, an interesting Web-based money management software and community. CEO and co-founder Jason Knight often answers visitors questions with tips and advice.

?, an interactive community of investors and a personalized investment tool. The platform allows investors of all sorts, from all over the world to come together, collaborate and share investing knowledge and inights through blogs and discussions.

?The Motley Fool's CAPS application (, a service that pools the resources of the Motley Fool community to help investors identify stocks to invest in and to avoid.

?, a free site that is designed to help investors get more free information. The community shares its stock picks while the main purpose is to learn and to back-test your investment strategies.

Beyond these sites, a couple of other interesting Web sites stand out that may prove useful to financial advisors. One particularly helpful site that takes advantage of online video is For weeks before a company's initial public offering, the CEO and CFO typically crisscross the country talking up the company to potential investors. Thanks to RetailRoadshow, individual investors can access pre-IPO presentations through video or audio. Make sure you check out the site before the company goes public, though, because the presentations are not available after the transaction is completed.

Another Web 2.0 site worth a look offers a glimpse of how the latest technologies are changing fundamental relationships in the financial community: Leveraging social networking and user-generated content, invites entrepreneurs to share their experiences with investors and to rate and rank the venture capitalists they have encountered. The controversial aspect is that the site's contributors are all anonymous. Until recently, even its founder was anonymous. Last November, however, the founder revealed himself as Adeo Ressi, a serial entrepreneur who founded Game Trust Inc., a gaming company recently sold to RealNetworks Inc., and who has had some bad experiences with people who have invested in his company. With TheFunded, his goal is to make it easy for entrepreneurs to share information about investors and to help them find funding faster and more simply than the current process provides. Alarmed by some of the critiques they have received on TheFunded, some venture capitalists are already changing the way they interact with entrepreneurs.

It will be interesting to see if the model for this type of site catches on. Perhaps clients will one day be using Web 2.0 to critique your firm. It's likely they may already be using it to see what people are saying about you online. The more you know and understand the phenomenon, the better.

Mary Kathleen Flynn is associate editor of The Deal's "Tech Confidential."

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